BILL NUMBER: SB 1077	CHAPTERED  10/10/99

	CHAPTER   753
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 7, 1999
	PASSED THE SENATE   AUGUST 26, 1999
	PASSED THE ASSEMBLY   AUGUST 23, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 1, 1999
	AMENDED IN SENATE   MAY 19, 1999
	AMENDED IN SENATE   MAY 6, 1999

INTRODUCED BY   Senator Burton

                        FEBRUARY 26, 1999

   An act to amend Section 769 of the Insurance Code, relating to
insurance.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1077, Burton.  Insurance:  agents and brokers.
   Existing law requires, with certain exceptions, that an insurer
provide an insurance broker-agent 120 days' advance notice prior to
terminating or amending a written agency or written brokerage
contract with the broker-agent if the contract has been in effect for
at least one year.
   This bill would add an additional exception providing that the 120
days' advance notice requirement does not apply if the broker-agent
transferred ownership, control, or servicing of policies written with
the insurer to another insurer or other specified entities.
   Existing law provides that an insurer is not required to renew any
policy of insurance if a broker-agent is no longer the broker-agent
of record with respect to the policy or in various other situations,
as specified.
   This bill would provide that an insurer is also not required to
compensate a terminated broker-agent under these circumstances.  This
bill would also provide that an insurer is not required to renew any
policy of insurance or compensate a terminated broker-agent if the
broker-agent has transferred ownership, control, or servicing of
policies written with the insurer to another insurer or an entity
owned or controlled by another insurer or to an entity owning or
controlling another insurer.  This bill would make other related
changes to these provisions.
   This bill would make other technical, nonsubstantive changes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 769 of the Insurance Code is amended to read:
   769.  (a) After a written agency or written brokerage contract,
where the broker-agent represents the insurer, has been in effect for
at least one year, it shall not be terminated or amended by an
insurer, except by mutual agreement, unless 120 days' advance written
notice has been given by the insurer to the broker-agent.
   (b) The advance notice required by this section does not apply if
the broker-agent has done any of the following:
   (1) Exceeded his or her binding authority under the agency or
brokerage contract.
   (2) Violated the written underwriting rules or regulations of the
insurer, a copy of which has been provided to the broker-agent, which
misleads the insurer concerning the nature or extent of a risk.
   (3) Failed to comply with the fiduciary requirements set forth in
Section 1733, 1734, 1734.5, or 1735.
   (4) Failed, either within 10 days after written notice upon
failure to remit funds within the time limits set forth in the agency
or brokerage contract or within 30 days after written demand if the
agency or brokerage contract does not set forth time limits, to remit
funds due and owing to the insurer.
   (5) Had his or her license suspended or revoked by the
commissioner.
   (6) Engaged in fraudulent acts affecting his or her relationship
with the insurer or its insureds.
   (7) Transferred ownership, control, or servicing of policies
written with the insurer to another insurer, or to an entity directly
or indirectly owned or controlled by an insurer or to an entity
directly or indirectly owning or controlling an insurer.
   (c) When a broker-agent's contract is terminated as provided by
this section, the rights, duties, and obligations set forth in the
terminated contract of the broker-agent having property rights in
renewals shall continue solely with respect to policies then in force
or renewed as provided by this section until those policies are
canceled in accordance with law, placed by the broker-agent with
another insurer, or have expired.  The broker-agent's authority
during the period following notice of termination of his or her
contract shall be governed by the written contract between the
broker-agent and the insurer, except that, after the receipt of the
notice of termination, the broker-agent shall not bind new risks on
behalf of the insurer, renew policies except as permitted by this
section, or otherwise increase the obligation of the insurer, without
the express approval of the insurer or in accordance with the terms
of an existing policy.
   (d) If a terminated broker-agent is unable, after making a good
faith effort, to place existing policies with another insurer, the
insurer then insuring the risk shall, at the broker-agent's request,
renew any insurance contract written by the broker-agent for the
insurer for one policy term or a period of one year, whichever is
shorter.  Where the insurer is prohibited by subdivision (c) of
Section 1861.03 from nonrenewing the risk, the insurer shall continue
to compensate the broker-agent for servicing the policies written by
the insurer prior to termination of the broker-agent relationship
until the insurer can cancel or nonrenew the policyholder pursuant to
statute or the broker-agent moves the policyholder to another
insurer but, in no event, shall the insurer's obligation to
compensate the broker-agent exceed three years after termination of
the broker-agent's contract, unless otherwise provided by terms of
the contract.  The renewal shall be at the insurer's premium rates in
effect on the date of renewal and at prevailing commission rates for
that class or line of business in effect on the date of renewal for
broker-agents whose contracts are not terminated.  An insurer shall
not be precluded from paying a commission to a terminated
broker-agent pursuant to this section at a level the insurer is
paying at the time it provides notice to the broker-agent that it is
terminating the contract or as set forth in the written agreement,
providing that there has not been any unilateral change in the
commission paid by the insurer within 180 days of the notice of the
broker-agent's termination.  An insurer shall be allowed to subtract
from the three-year time period provided to a broker-agent upon
termination, the time period that elapsed during which the
broker-agent is involved in a rehabilitation program with an insurer.

   (e) (1) Notwithstanding any other provision of this section, no
insurer shall be required to renew any policy of insurance or
compensate a terminated broker-agent pursuant to the provisions of
this section if any of the following apply:
   (A) The broker-agent is no longer the broker-agent of record with
respect to the policy, or the broker-agent has transferred ownership,
control, or servicing of policies written with the insurer to
another insurer or an entity owned or controlled, directly or
indirectly, by another insurer or to an entity owning or controlling,
directly or indirectly, another insurer.
   (B) The broker-agent has died or has become unable to conduct his
or her business affairs.
   (C) The broker-agent has failed, either within 10 days after
written demand upon failure to remit funds within the time limits set
forth in the agency or brokerage contract or within 30 days after
written demand if the agency or brokerage contract does not set forth
time limits, to remit funds due and owing to the insurer.
   (D) The broker-agent has failed to follow the written instructions
of the insurer, a copy of which has been provided to the
broker-agent, generally applicable to the renewal of policies.
   (E) The commissioner has determined that the renewal of the policy
would threaten the solvency of the insurer.
   (F) The insurer suffers the withdrawal of reinsurance covering all
or part of the risk and this withdrawal of reinsurance is likely to
threaten, in the opinion of the commissioner, the financial integrity
or solvency of the insurer.
   (G) The insurer has withdrawn from the State of California in
accordance with Sections 1070 to 1076, inclusive.
   (2) Nothing in this subdivision shall be construed to authorize
the nonrenewal of a good driver discount policy as defined and issued
pursuant to the provisions of Sections 1861.02, 1861.025, and
1861.03.
   (f) This section shall not apply to a life insurer, an agent of a
life insurer, a disability insurer, a nonprofit hospital service
plan, an agent of a disability insurer or nonprofit hospital service
plan, an agent who is the employee of an insurer, or to an agent who,
by contractual agreement either represents only one insurer or group
of affiliated insurers or who is required by contract to submit
risks to a specified insurer or group of affiliated insurers prior to
submitting them to other insurers.
   (g) This section does not apply to any management contract of a
managing general agent as defined in Section 1735, but it shall
continue to apply to any agency or brokerage contract of a managing
general agent or any portion of a management contract authorizing a
managing general agent to act in his or her capacity as an insurance
agent as defined in Section 1621, or an insurance broker as defined
in Section 1623.
   (h) (1) For purposes of this section, a "rehabilitation program"
shall include, but not be limited to, all of the following:
   (A) Written communication to the broker-agent outlining the fact
that the broker-agent is on rehabilitation status.
   (B) Identification by the company of problem areas.
   (C) Mutual agreement on performance objectives and specific dates
for accomplishment.
   (D) Length of rehabilitation plan to be negotiated, but not less
than six months.
   (2) For purposes of subdivision (d), a good faith effort is
satisfied by a terminated broker-agent who markets his or her book of
business to other insurers that underwrite the same or similar lines
of insurance, consistent with the interests of the policyholders.
An insurer who terminates a broker-agent shall be entitled to be
informed of the marketing activity and to obtain copies of any
correspondence reflecting these efforts.  However, nothing in this
section shall be interpreted to allow the insurer to require the
terminated broker-agent to obtain written rejections of an agency
appointment from other insurers, or written rejections from
individual policyholders.
   (i) An insurer that takes action, other than terminating the
written agency or brokerage contract, solely for the purpose of
avoiding the provisions of subdivision (a) shall be required to
extend existing policies pursuant to the applicable provision of
subdivision (d) if both of the following apply:
   (1) The action is designed to impact only a specific agency or
agencies and the business produced by them.
   (2) The action results in the cancellation or nonrenewal of
substantially all of the agency's or agencies' business.
   (j) This section shall apply to written agency contracts becoming
effective on or after January 1, 1987.  The amendments to this
section by the act adding this sentence also apply to any written
agency contract amended after January 1, 1988.
   (k) The amendments to this section made by the act adding this
subdivision shall apply to any written brokerage contract becoming
effective, or amended, on or after January 1, 1996.
